'Vacancy tax': Calls to stop landlords from keeping shops empty

Australia's shopping strips and centres are being crunched by sky-high rents and the nation's small business commissioners want to penalise landlords for empty shopfronts.

State small business commissioners and small business and family enterprise ombudsman Kate Carnell met in Sydney on Thursday to discuss pain points affecting the nation's smallest businesses and troubles in the retail sector were front of mind.

NSW small business commissioner Robyn Hobbs.

"One of the great dilemmas we’ve got is that there is incentives for landlords to leave premises vacant rather than reduce rent," Ms Carnell said.

"It’s simply because of the way banks value properties based on what the rent is."

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Ms Carnell believes there needs to be a conversation with the banks in the first instance about the role that indicative rental yields play on the valuation of a property portfolio.

The concept of a tax on empty shopfronts could also be considered, she said.

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"We need to have a look at a vacancy tax as an area," she told the Sydney Morning Herald and The Age.

Small business commissioners from New South Wales, Queensland, Victoria, South Australia and Western Australia met at the Small Business Friendly Councils conference as part of a broader discussion on how governments can help breathe life into suburbs through the support of local businesses.

The business leaders said across the nation councils were being forced to rethink "high street" shopping because rents were unsustainable for many in both cities and regional areas.

One of the great dilemmas we’ve got is that there is incentives for landlords to leave premises vacant rather than reduce rent.

Kate Carnell

NSW small business commissioner Robyn Hobbs told the Sydney Morning Herald and The Age she supported strong action to stop commercial property owners from simply keeping their shopfronts empty if no tenants could afford their asking price.

"Landlords can hold onto their assets so that their assets appreciate in value … but when you’re in a [shopping] centre, the last thing you want to see is an empty shop because the landlord is using it as an asset," she said.

Empty shopfronts were "a real blight for councils" and local governments and the Australian Tax Office should be consulted to decide the best course to drive landlords towards keeping their shops tenanted, she said.

"I believe that is one of the areas I would support legislation going forward."

The audience at the small business event cheered the suggestion of changes to legislation to force the hands of landlords.

Australian small business and family enterprise ombudsman Kate Carnell. Credit:Simon Schluter

Recently appointed NSW minister for finance and small business, Damien Tudehope, said regulating how long a landlord could keep their shop empty could be very difficult to execute in practice.

While it was clear strip shopping centres "hurt very badly" when there are high numbers of vacancies, he said finding the right method to limit how long a shop could be without tenants would be difficult.

"You wonder why it would ever be in the landlord’s best interests to keep shopfronts empty," he said.

Australian Retailer's Association chief executive Russell Zimmerman said while the issue of empty shopfronts was complicated, considering ways to "incentivise them [landlords] to get someone in" to empty retail sites would be welcome.

Australian Shopping Centre Council executive director Angus Nardi said while mainstream shopping strips may have a problem with vacancies, its members do not.

"It may be the case for main-street shops, however our industry has a market incentive to have occupied tenancies, which is precisely why our members’ average occupancy rate is 99.1% and hasn’t gone below 99% in recent years," Mr Nardi said.

The reporter attended the Small Business Friendly Councils conference in Sydney as a guest of the NSW Department of Industry.